On Oct 5, Bloomberg reported that mortgage rates in Singapore are nearing an affordability tipping point that may hit borrowers’ disposable income and dent buyer demand. According to Bloomberg, mortgage rates above 4% may squeeze borrowers’ disposable income and hurt their ability to cover necessities. It means a 20- to 30-year loan of every $1 million would require a monthly payment of about $4,774 to $6,060, Bloomberg estimates.
DBS Group Holdings, Overseas-Chinese Banking Corp and United Overseas Bank have all raised their mortgage rates in the wake of the US Federal Reserve rate hike cycle.
While banks are likely to benefit through housing loans and their share prices have been resilient compared to the market’s recent volatility, developers’ share prices have been hit. They may remain volatile to the point of turning weak despite their seemingly oversold positions.
While traditional developers maintain most of their residential units are sold, sentiment could still impact their share prices. In addition, some developers who have diversified to other geographies such as Australia, the UK and China are likely to be affected by weakening currencies. In addition, the turmoil in the gilt market has driven up risk-free rates in the UK to 4% and higher which could impact the capital values of investment properties.
UOL Group is not far off its Covid-low of $6.22 and its share price is showing signs of stabilising. Immediate support appears to have been established at $6.44. Any rebound, though, is likely to be tepid, with the breakdown level of $6.70 providing resistance. While most of UOL’s residential properties under development have largely been sold, it acquired two sites recently — Pine Grove and Watten Estate Condominium.
Ho Bee Land has broken an uptrend and the bottom of what looks like a top formation at $2.74. At the same time, the 50-, 100- and 200- day moving averages have turned down simultaneously. The break below $2.74 indicates a downside of $2.34, a level that coincides with a significant amount of support. What could happen is that prices fall to this level and attempt to build some sort of minor base. Short-term indicators are oversold and the lowest they have been for more than three years but these types of indicators can remain near the lows and bounce around these levels for weeks.
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In February, Ho Bee Land acquired The Scalpel in London for the equivalent of $1.31 billion. In its financial report for 1HFY2022 ended June, the developer’s current liabilities exceeded its current assets by $1,044 million versus the $319.2 million as at Dec 31, 2021— most likely due to the acquisition.
“The group expects to refinance $1,128 million of its short-term bridging loans in the next 12 months and is confident that the refinancing of the facilities will occur as required. ... management assessed that the group will be able to meet its obligations that are due within the next 12 months,” says Ho Bee Land in its 1HFY2022 financial statement.
Elsewhere, Frasers Property (FPL) is at its lowest level in at least five years with the share price hovering at around $1 compared to its net asset value as at March 31 of $2.53. Although prices have dipped below this level, overall, the $1 mark should act as psychological support. In the meantime, short-term indicators are attempting to rebound off a low which has been tested several times. This suggests that in the short term, at any rate, the share price is attempting to form a positive divergence with its oscillators, differentiating FPL from its peers. Once again, as with peers, any rebound is unlikely to be sustained for the next several weeks.
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